That tracked falls on the other side of the Atlantic, where the Dow Jones fell by more than 1pc overnight. Asia was also on the back foot. In the Japanese markets, the Nikkei closed down 1.74pc, and the Topix fell 1.33pc. Seoul's Kospi fell 2pc overnight.

Gold echoed the slide in equities, with the yellow metal sinking 4.5pc to $1290.69 an ounce.

The Federal Open Market Committee said on Wednesday that it will not start pulling back on its $85bn a month bond buying programme just yet, but made it clear that if America's unemployment rate continues to improve and inflation edges closer to 2pc, it will begin tapering fiscal stimulus measures.

Ben Bernanke, Fed chairman, said: "The committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year.

"And if the subsequent data remain broadly aligned with our current expectations for the economy, we will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year."

Markets have been hit by volatility over the past month as investors have fretted over the end of quantitative easing, which has been spurring on a marked recovery in equity markets.

Last month, the FTSE 100 soared to more than 6800 points, nearing the highs seen during the dotcom boom in 1999, while the Dow Jones raced to record levels. But fears of an end to the QE boost has since prompted a sharp correction.

"Global equities are caught in an aggressive selloff, the euro gets whacked as does sterling and all commodity-linked currencies; the US dollar being the only clear winner, unsurprisingly," said Ishaq Siddiqi of ETX Capital.

"It seems investors are ignoring the silver lining in the Fed’s press conference; we now have a timeframe for an reduction of QE and a scheduled end to the programme, which should remove some of that uncertainty about 'when' the Fed will unwind," he added.

While it was Mr Bernanke's news that the end was in sight for the central bank's massive stimulus programme that sparked the sell-off, it was not the only cause for the market slump.

The Chinese economy is under pressure from a refusal of its central bank to pump more liquidity into the system, causing interbank lending rates to spike to multi-year highs. Meanwhile, factory activity has slowed to a nine-month low, according to a key survey.